Manufacturers need to invest or risk derailing growth

Capital expenditures expected to decrease by an average of 10.9% this year.

OTTAWA — Canadian manufacturers holding off investment in their businesses even as many of them reach their capacity to grow could potentially stall recent economic momentum, according to the Conference Board of Canada.

A briefing from the Ottawa-based research group warns “if non-energy investment does not rebound over the coming months, capacity constraints in some manufacturing industries could impact future growth.”

Exports of transportation equipment, wood products, food, primary metal and paper industries have been driving manufacturing growth in Canada accounting for 64% of year-over-year increases in output. In the fourth quarter of 2015, wood products manufacturers had reached 99.3% of capacity, paper manufacturing hit 98.2% and transportation equipment was operating at 97.3%.

Yet manufacturers are expected to reduce capital expenditures in areas such as machinery and equipment this year by an average of 10.9%. The Conference Board notes transportation equipment, wood products, food, primary metal and paper manufacturers will likely post worse-than-average investment declines.

Business leaders cited weak market demand, government policies, a shortage of qualified staff, and the depreciation of the Canadian dollar (which increases the cost of imported technology and machinery) as reasons for not investing, and will likely continue to hold back investment even as demand in the US rises.

Click here to access the executive briefing.

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